Mitch McConnell, the incoming Senate majority leader says that the first action of the new Senate will be to vote on approving the Keystone XL Pipeline. Without a doubt, the measure to grant full approval for the pipeline will pass. It will also pass the House and go to president Obama for his signature. My guess is that Obama will actually sign the legislation or, alternatively, grant approval for the pipeline himself. The six year delay by Obama in approving the massive construction project will be over.
The irony, of course, is that the pipeline may never get built. Oil prices below $60 per barrel may have made the entire project unprofitable. For the company to go ahead an build, it would require a leap of faith that oil prices will recover and remain high enough to make the enormous investment worthwhile.
It is important to remember that construction of Keystone would allow an increase in world oil output by just under 1%. At the moment, that additional oil would further crush the price. The ongoing oil glut would last longer, and the price would likely fall further. The question, however, is not what would happen today. If Keystone goes ahead, it will not be complete for a few years. The proper time to consider the effect on oil prices then starts in 2016. By that time, the price is likely to have recovered somewhat as new drilling is reduced and supply balances more closely to demand. Building Keystone would likely mean lower future energy prices.
Obama clearly never wanted to build the pipeline because of "environmental" concerns. After a lifetime of hating "big oil", he really did not want to do something that helped the oil industry, even if it meant jobs for 60 thousand people and help for America's economy. Obama, however, couldn't just say that, so instead he used delay. In a rather strange way, it seems that the fracking boom in oil and gas production (which Obama also opposed) may have killed Keystone for Obama.
The irony, of course, is that the pipeline may never get built. Oil prices below $60 per barrel may have made the entire project unprofitable. For the company to go ahead an build, it would require a leap of faith that oil prices will recover and remain high enough to make the enormous investment worthwhile.
It is important to remember that construction of Keystone would allow an increase in world oil output by just under 1%. At the moment, that additional oil would further crush the price. The ongoing oil glut would last longer, and the price would likely fall further. The question, however, is not what would happen today. If Keystone goes ahead, it will not be complete for a few years. The proper time to consider the effect on oil prices then starts in 2016. By that time, the price is likely to have recovered somewhat as new drilling is reduced and supply balances more closely to demand. Building Keystone would likely mean lower future energy prices.
Obama clearly never wanted to build the pipeline because of "environmental" concerns. After a lifetime of hating "big oil", he really did not want to do something that helped the oil industry, even if it meant jobs for 60 thousand people and help for America's economy. Obama, however, couldn't just say that, so instead he used delay. In a rather strange way, it seems that the fracking boom in oil and gas production (which Obama also opposed) may have killed Keystone for Obama.
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